The Story Behind the Pass That Gets You Into Every Gym Class

It was 8:15 p.m., and Payal Kadakia was sitting in an Astor Place Starbucks. She was diligently working on her startup, Classtivity, in preparation for a weekly meeting at a New York accelerator program, TechStars.

Suddenly, a man came out of nowhere, spun her around and sprayed her in the face with mace.

"Hey!" Kadakia screamed in shock. The man tugged at her laptop and stole her phone before an onlooker scared him away.

"I never really cared about having muscle before. I never really thought I'd get attacked," Kadakia told Business Insider over coffee. She's petite, which isn't surprising since she's a world-class dancer who's been performing since age three. "But that moment motivated me to really work at it to better protect myself. And that in turn motivated me to perfect my business."

The mugging occurred two years ago. Since then, Kadakia's startup ClassPass has transformed from a near failure into a company with hockey-stick growth.

Kadakia's initial idea, Classtivity, was to create a better registration product for local fitness venues than the SaaS solution most of them use, Mind & Body. But fewer than 100 classes were booked on Classtivity during the company's first year. Even when they ran a $49 monthly promotion, customer retention rates were low.

In March 2013, Kadakia's team began working on plan B. They noticed people were trying to hack into their system to repeatedly use the $49 promotion. Customers wanted to test out a lot of studios, not the same ones over and over again. So Kadakia and her co-founder Mary Biggins went door-to-door pitching studios a product they hadn't yet built with a pricing structure they hadn't worked out.

The idea they pitched was ClassPass, a monthly gym-like membership for people who want to get in shape. But unlike a gym, ClassPass doesn't tie you to one type of workout or location. For $99, users can sign up for local classes from hundreds of studios ranging from Barry's Boot Camp to Exhale Spa to Flywheel Sports. ClassPass works with each venue on an agreed-upon referral rate and pockets the rest of the monthly subscription. Users can only register for the same venue three times per month so ClassPass doesn't cannibalize its partners' loyal customers and pricing.

Since its launch last May, people have booked more than 350,000 classes through the platform. Some venues are so popular on ClassPass that Kadakia's team writes them monthly referral checks that are 6-figures.

There are a few hundred studios in New York City to choose from. ClassPass also recently launched in Boston and Los Angeles. Next week it will launch with about 40 venues in San Francisco.

The traction feels good for Kadakia's 28-person team. Investors gave ClassPass $4 million in March and they're eager to put more money into the company.

"It's funny, in TechStars you learn all about how to pitch investors. It's nice once you have a working startup and the tables turn." Kadakia says the two years of struggle make the success she's experiencing feel more rewarding. "We never would have built ClassPass if I hadn't learned so much from the Classtivity experience," she says.